570 Lexington Avenue, New York, NY 10022-6837 | Tel. 800-245-9888/212-702-3500 | Fax 212-702-3535 | www.rochdale.com
San Francisco | Orlando | Dallas | Richmond
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
Rochdale Core Alternative Strategies Fund TEI LLC (the “TEI Fund”) and its subsidiary, Rochdale Core Alternative Strategies Fund (Cayman) LDC (the “Offshore Fund”) together constitute the “Fund”. The TEI Fund is a Delaware limited liability company registered under the Investment Company Act of 1940, as amended, as a closed-end management investment company. The TEI Fund commenced investment operations on July 1, 2007. The TEI Fund’s investment objective is to seek long-term growth of principal across varying market conditions with low volatility. “Low volatility” in this objective means the past monthly net asset value fluctuations of the TEI Fund net asset value that are no greater than the rolling 10-year annualized standard deviation of the monthly ups and downs of the higher of: (1) the return of the Barclays Capital Aggregate Bond Index plus 3% or (2) half of the return of the Standard & Poor’s 500-stock Index.
The TEI Fund invests substantially all of its investable assets in the Offshore Fund, a Cayman Islands limited duration company with the same investment objective as the TEI Fund. The Offshore Fund in turn invests substantially all of its investable assets in Rochdale Core Alternative Strategies Master Fund LLC (the “Master Fund”), a registered investment company with the same investment objective as the Offshore Fund and the TEI Fund. The Offshore Fund serves solely as an intermediate entity through which the TEI Fund invests in the Master Fund. The Offshore Fund makes no independent investment decisions and has no investment or other discretion over the investible assets. Rochdale Investment Management LLC (the “Manager”, “Adviser” or “Rochdale”) is the investment adviser to the Master Fund. The Manager is also the adviser to Rochdale Core Alternative Strategies Fund, LLC, which also invests all of its investable assets with the Master Fund. The Manager delegates sub-investment advisory responsibilities to PineBridge Investments (the “Sub-Adviser”) with respect to the Master Fund.
The Manager has engaged the Sub-Adviser to provide sub-investment advisory services. The Sub-Adviser has investment discretion to manage the assets of the Master Fund and is responsible for identifying prospective Hedge Funds, performing due diligence and review of those Hedge Funds and their Hedge Fund Managers, selecting Hedge Funds, allocating and reallocating the Master Fund’s assets among Hedge Funds, and providing risk management services, subject to the general supervision of the Manager.
The financial statements of the Master Fund are included elsewhere in this report and should be read in conjunction with the TEI Fund’s financial statements. At March 31, 2012, the TEI Fund’s beneficial ownership of the Master Fund’s net assets was 65.43%.
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
Notes to Consolidated Financial Statements
| 1. | Organization (continued) |
The TEI Fund reserves the right to reject any subscriptions for Interests in the TEI Fund. Generally, initial and additional subscriptions for investment (or “Member Interests”) in the TEI Fund by eligible Members may be accepted at such times as the TEI Fund may determine. Each Member must be a qualified investor and subscribe for a minimum initial investment in the TEI Fund of $25,000. Additional investments in the TEI Fund must be made in a minimum amount of $10,000. Brokers selling the TEI Fund may establish higher minimum investment requirements than the TEI Fund. The TEI Fund from time to time may offer to repurchase member interests in the TEI Fund at such times and on such terms as may be determined by the TEI Fund’s Board in its complete and absolute discretion. TEI Fund interests must be held for at least six months after initial purchase (or for a second six-month period as described below). Members must hold TEI Fund interests for at least six months before being eligible to request that the TEI Fund repurchase TEI Fund interests during a tender offer. If no such request is made by a Member during a tender offer, such Member must hold TEI Fund interests for a second six-month period before submitting an initial request.
| 2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the TEI Fund.
Basis of Presentation and Use of Estimates
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Fair Value Measurements
The TEI Fund follows fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized in the three broad levels listed below:
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
Notes to Consolidated Financial Statements
| 2. | Significant Accounting Policies (continued) |
Fair Value Measurements (continued)
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the TEI Fund has the ability to access.
Level 2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the TEI Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in these securities.
For the fiscal year ended March 31, 2012, the TEI Fund’s investment consisted entirely of an investment in the Master Fund. The fair value hierarchy of the Master Fund’s investments is disclosed in the notes to the Master Fund’s financial statements, included elsewhere in this report.
In May 2011, the Financial Accounting Standards Board (“FASB”) issued “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements” in GAAP and the International Financial Reporting Standards (“IFRS”). This requirement amends FASB Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. This requirement is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. Management is currently evaluating the impact of these amendments and does not believe they will have a material impact on the TEI Fund’s financial statements.
Investments Valuation
The net asset value of the TEI Fund is determined as of the close of business at the end of each month. The net asset value of the TEI Fund equals the value of the assets of the TEI Fund, less liabilities, including accrued fees and expenses.
The TEI Fund’s investment in the Master Fund represents substantially all of the TEI Fund’s assets. All investments owned are carried at fair value, which is the portion of the net asset value of the Master Fund held by the TEI Fund.
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
Notes to Consolidated Financial Statements
| 2. | Significant Accounting Policies (continued) |
Investments Valuation (continued)
The accounting for and valuation of investments by the Master Fund is discussed in the notes to the financial statements for the Master Fund, which are an integral part of these financial statements.
The TEI Fund has not maintained any positions in derivative instruments or directly engaged in hedging activities.
Investment Income Recognition
Purchases and sales of investments in the Master Fund are recorded on a trade-date basis. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date. Realized and unrealized gains and losses are included in the determination of income as allocated from the Master Fund based upon its ownership interest.
Fund Expenses
The direct expenses of the TEI Fund include, but are not limited to, the following: legal fees; accounting and auditing fees; custodial fees; costs of computing the TEI Fund’s net asset value; costs of insurance; registration expenses, expenses of meetings of the Board and members; all costs with respect to communications to members; and other types of expenses as may be approved from time to time by the Board. The TEI Fund, as an investor in the Master Fund, recognizes its share of the fees and expenses of the Master Fund (including a management fee and incentive fee).
Income Taxes
The TEI Fund’s tax year end is December 31. The TEI Fund is treated as a partnership for Federal income tax purposes, whereby each Member of the TEI Fund is responsible for the tax liability or benefit relating to such Member’s distributive share of taxable income or loss. Accordingly, no provision for Federal income taxes is reflected in the accompanying financial statements.
The TEI Fund has adopted authoritative guidance on uncertain tax positions. The TEI Fund recognizes the effect of tax positions when they are more likely than not of being sustained. Management is not aware of any exposure to uncertain tax positions that could require accrual or which could affect the TEI Fund’s liquidity or future cash flows, or its treatment as a flow through entity, pursuant to relevant income tax regulations. As of March 31, 2012, the TEI Fund’s tax years 2008 through 2011 remain open and subject to examination by relevant taxing authorities.
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
Notes to Consolidated Financial Statements
| 2. | Significant Accounting Policies (continued) |
Distribution Policy
The TEI Fund has no present intention of making periodic distributions of its net investment income or capital gains, if any, to Members. The amount and frequency of distributions, if any, will be at the sole discretion of the Board.
Capital Accounts
Net profits or net losses of the TEI Fund for each month are allocated to the capital accounts of Members as of the last day of each month in accordance with Members’ respective investment percentage in the TEI Fund. Net profits or net losses are measured as the net change in the value of the net assets of the TEI Fund during each month, before giving effect to any repurchases of interest in the TEI Fund, and excluding the amount of any items to be allocated to the capital accounts of the Members of the TEI Fund, other than in accordance with the each Members’ respective investment percentage.
Prior to the end of each quarter and year end, the TEI Fund receives Member contributions with an effective subscription date of the first day of the following month. These contributions are held by the Master Fund and have an effective investment date of first day of the following month. The Master Fund, in turn, makes contributions to certain Hedge Funds, which have effective subscription dates of the first day of the following month. These amounts are reported as “Contributions received in advance” and “Investments made in advance”, respectively.
Cash and Cash Equivalents
The TEI Fund considers all highly liquid investments with a maturity of ninety days or less at time of purchase to be cash equivalents.
Consolidation
The financial statements of the TEI Fund includes the Offshore Fund, its wholly owned subsidiary. All inter-company transactions have been eliminated in consolidation.
Subsequent Events
The TEI Fund has adopted financial reporting rules regarding subsequent events, which requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the TEI Fund’s related events and transactions that occurred subsequent to March 31, 2012 through the date the financial statements have been issued (see Note 8).
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
Notes to Consolidated Financial Statements
| 3. | Commitments and Other Related Party Transactions |
The Manager has contractually agreed to waive and/or reimburse the expenses of the TEI Fund and the Master Fund, to the extent needed to limit their combined annual operating expenses to 2.25% of net assets. To the extent that the Manager reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which the expenses were reimbursed or absorbed. The TEI Fund will make no such payment, however, if its total annual operating expenses exceed the expense limits in effect at the time the expenses are to be reimbursed or at the time these payments are proposed. For the fiscal year ended March 31, 2012, the Manager did not recoup any fees or expenses.
The Sub-Adviser is entitled to receive a performance-based incentive fee equal to 10% of the net profits (taking into account net realized and unrealized gains or losses and net investment income or loss), if any, in excess of the non-cumulative “Preferred Return,” subject to reduction of that excess for prior losses that have not been previously offset against net profits (the “Incentive Fee”). The Incentive Fee will be accrued monthly and is generally payable annually on a calendar year basis. The Preferred Return is an annual return equal to the 3-year Treasury constant maturity rate as reported by the Board of Governors of the Federal Reserve System as of the last business day of the prior calendar year plus 2%.
| 4. | Investor Servicing Fees |
The TEI Fund pays a fee to RIM Securities, LLC, an affiliate of the Manager, as Distributor to reimburse it for payments made to broker-dealers and certain financial advisers (“Investor Service Providers”) that have agreed to provide ongoing investor services to investors in the TEI Fund that are their customers. This fee is paid quarterly and in an amount, with respect to each Investor Service Provider, not to exceed the lesser of: (i) 0.25% (on an annualized basis) of the aggregate value of outstanding interests held by investors that receive services from the Investment Service Provider, determined as of the last day of the calendar month (before any repurchase of Member interests); or (ii) the Distributor’s actual payments to the Investment Service Provider.
| 5. | Concentration, Liquidity and Off-Balance Sheet Risks |
The Master Fund invests primarily in Hedge Funds that are illiquid securities and not registered under the 1940 Act. Such Hedge Funds invest in actively traded securities, illiquid securities, derivatives and other financial instruments using several investment strategies and investment techniques, including leverage, which may involve significant risks. The Master Fund’s concentration and liquidity risks are discussed in the notes to the Master Fund’s financial statements which are attached elsewhere in this report and are an integral part of these financial statements.
In the normal course of business, the Hedge Funds in which the Master Fund invests trade various derivatives and financial instruments and enter into various investment
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
Notes to Consolidated Financial Statements
| 5. | Concentration, Liquidity and Off-Balance Sheet Risks (continued) |
activities with off-balance sheet risk. The Master Fund’s off balance sheet risk in these financial instruments is discussed in the notes to the Master Fund’s financial statements which are attached elsewhere in this report and are an integral part of these financial statements.
| 6. | Investment Transactions |
For the fiscal year ended March 31, 2012, the TEI Fund’s assets were invested in the Master Fund and the TEI Fund made aggregate purchases of $3,402,522 and aggregate sales of $3,254,091 in the Master Fund.
The TEI Fund offered to purchase up to $5,000,000 of Interests in the TEI Fund thereof properly tendered by Members at a price equal to the net asset value of Interests as of December 30, 2011. For Interests tendered, the Member received a promissory note entitling the Member to a cash amount equal to at least 90% of the net asset value calculated on December 30, 2011, of the Interests tendered and accepted for purchase by the TEI Fund, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 15, 2011. The offer terminated at 5:00 p.m., Eastern Time, on September 12, 2011. Pursuant to the Offer, no Interests were tendered by Members of the TEI Fund.
On April 25, 2012, the Adviser and City National Bank (“City National”) announced that they had reached an agreement pursuant to which City National will acquire 100% of the issued and outstanding stock of the Adviser’s Parent Company. This transaction (the “Transaction”) is expected to be completed on or about June 30, 2012 (“Closing Date”). Following the Closing Date, the Adviser, together with certain other companies that, currently, are also wholly-owned by the Adviser’s parent company, will continue to conduct their businesses as wholly-owned subsidiaries of City National. While the Transaction is expected to close on the Closing Date, consummation of the Transaction is contingent on the satisfaction of several conditions.
Management has evaluated the impact of this subsequent event and determined it will not have a material impact on the TEI Fund’s financial statements.
Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary
| | | | | | | | | | | | | | | Period from | |
| | | | | | | | | | | | | | | July 1, 2007 | |
| | | | | | | | | | | | | | | (Commencement of | |
| | | | | | | | | | | | | | | Operations) | |
| | | Year Ended | | | Year Ended | | | Year Ended | | | Year Ended | | | through | |
| | | March 31, 2012 | | | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | March 31, 2008 | |
| Total Return before incentive fee | | | (4.64 | %) | | | 6.69 | % | | | 8.48 | % | | | (11.68 | %) | | | (5.11 | %) |
| Incentive fee | | | 0.05 | % | | | (0.09 | %) | | | (0.02 | %) | | | 0.00 | % | | | 0.00 | % |
| Total Return after incentive fee | | | (4.59 | %) | | | 6.60 | % | | | 8.46 | % | | | (11.68 | %) | | | (5.11 | %) |
| | | | | | | | | | | | | | | | | | | | | |
| RATIOS/SUPPLEMENTAL DATA | | | | | | | | | | | | | | | | | | | | |
| Net Assets, end of period ($000’s) | | $ | 36,383 | | | $ | 37,924 | | | $ | 38,628 | | | $ | 32,633 | | | $ | 30,573 | |
| Portfolio Turnover | | | 13.27 | % | | | 20.32 | % | | | 20.91 | % | | | 19.34 | % | | | 1.39 | % |
| | | | | | | | | | | | | | | | | | | | | |
| RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS | | | | | | | | | | | | | | | | | | | | |
| Net investment loss, before waivers/reimbursements or recoupment | | | (2.14 | %) | | | (2.28 | %) | | | (2.41 | %) | | | (2.10 | %) | | | (2.36 | %) |
| Net investment loss, after waivers/reimbursements or recoupment | | | (2.14 | %) | | | (2.33 | %) | | | (2.49 | %) | | | (2.13 | %) | | | (1.80 | %) |
| | | | | | | | | | | | | | | | | | | | | |
RATIO OF EXPENSES TO AVERAGE NET ASSETS, BEFORE INCENTIVE FEE | | | | | | | | | | | | | | | | | | | | |
| Operating expenses, before waivers/reimbursements or recoupment | | | 2.20 | % | | | 2.20 | % | | | 2.17 | % | | | 2.22 | % | | | 2.81 | % |
| Operating expenses, after waivers/reimbursements or recoupment | | | 2.20 | % | | | 2.25 | % | | | 2.25 | % | | | 2.25 | % | | | 2.25 | % |
| | | | | | | | | | | | | | | | | | | | | |
RATIO OF EXPENSES TO AVERAGE NET ASSETS, NET OF WAIVERS AND REIMBURSEMENTS AFTER INCENTIVE FEE | | | | | | | | | | | | | | | | | | | | |
| Operating expenses, after waivers/reimbursements or recoupment | | | 2.20 | % | | | 2.25 | % | | | 2.25 | % | | | 2.25 | % | | | 2.25 | % |
| Incentive fee | | | (0.05 | %) | | | 0.09 | % | | | 0.02 | % | | | 0.00 | % | | | 0.00 | % |
Total Operating expenses, after waivers/reimbursements or recoupment, after incentive fee | | | 2.15 | % | | | 2.34 | % | | | 2.27 | % | | | 2.25 | % | | | 2.25 | % |
Total return is calculated for all Members taken as a whole and an individual Member’s return may vary from these TEI Fund returns based on the timing of capital transactions. The total return for periods less than one year are not annualized.
Portfolio turnover represents the Master Fund’s portfolio turnover for the periods above. The ratios of net investment loss to average net assets and ratios of expenses to average net assets are annualized for periods of less than one year. The ratios of expenses to average net assets do not include expenses of the Hedge Funds in which the Master Fund invests.
The expense ratios are calculated for all Members taken as a whole. The computation of such ratios based on the amount of expenses assessed to an individual Member’s capital may vary from these ratios based on the timing of capital transactions.
The accompanying notes are an integral part of these financial statements
See Report of Independent Registered Public Accounting Firm
Rochdale Core Alternative Strategies Master Fund LLC
Financial Statements
March 31, 2012
Rochdale Core Alternative Strategies Master Fund LLC
Financial Statements
March 31, 2012
TABLE OF CONTENTS
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| | 1 | |
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| Financial Statements | | | |
| | 2 | |
| | 3 | |
| | 4 | |
| | 5 | |
| | 6 - 8 | |
| | 9 - 17 | |
| | 18 | |
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| | | |
The Members and
Board of Directors of
Rochdale Core Alternative Strategies
Master Fund LLC
We have audited the accompanying statement of assets, liabilities and members’ capital of Rochdale Core Alternative Strategies Master Fund LLC (the “Fund”), including the schedule of investments, as of March 31, 2012, the related statements of operations and cash flows for the year then ended, the statements of changes in members’ capital for the years ended March 31, 2012 and 2011, and the financial highlights for the years ended March 31, 2012, 2011, 2010, 2009 and for the period from July 1, 2007 (Commencement of Operations) through March 31, 2008. These financial statements and financial highlights are the responsibility of the Fund’s Management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatements. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of cash and investments as of March 31, 2012, by correspondence with the custodian and investment managers, respectively, or by other appropriate auditing procedures where replies from investment managers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of March 31, 2012 and the results of its operations and its cash flows for the year then ended, the statements of changes in members’ capital for the years ended March 31, 2012 and 2011 and its financial highlights for the years ended March 31, 2012, 2011, 2010, 2009 and for the period from July 1, 2007 (Commencement of Operations) through March 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
New York, New York
May 29, 2012
PKF O’CONNOR DAVIES, a division of O’CONNOR DAVIES, LLP
29 Broadway, New York, NY 10006 I Tel: 212.867.8000 I Fax: 212.687.4346 I www.odpkf.com
O’Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
Rochdale Core Alternative Strategies Master Fund LLC
March 31, 2012
| ASSETS | | | |
| Investments, at fair value (cost $48,580,010) | | $ | 54,528,187 | |
| Investments made in advance (see Note 2) | | | 1,250,000 | |
| Receivable for fund investments sold | | | 187,842 | |
| Interest receivable | | | 33 | |
| | | | | |
| Total Assets | | | 55,966,062 | |
| | | | | |
| LIABILITIES AND MEMBERS’ CAPITAL | | | | |
| Liabilities | | | | |
| Management fees payable | | | 114,463 | |
| Contributions received in advance (see Note 2) | | | 45,000 | |
| Accrued professional fees payable | | | 62,602 | |
| Accrued expenses and other liabilities | | | 75,252 | |
| | | | | |
| Total Liabilities | | | 297,317 | |
| | | | | |
| Total Members’ Capital | | $ | 55,668,745 | |
| | | | | |
| The accompanying notes are an integral part of these financial statements | | | | |
Rochdale Core Alternative Strategies Master Fund LLC
Year Ended March 31, 2012
| INVESTMENT INCOME | | | |
| Interest income | | $ | 2,137 | |
| | | | | |
| Investment Income | | | 2,137 | |
| | | | | |
| EXPENSES | | | | |
| Management fees (see Note 4) | | | 714,736 | |
| Administration fees | | | 107,826 | |
| Professional fees | | | 102,378 | |
| Directors’ fees | | | 16,453 | |
| Custody fees | | | 6,750 | |
| Other expenses | | | 4,411 | |
| | | | | |
| Total Expenses | | | 952,554 | |
| | | | | |
| Net Investment Loss | | | (950,417 | ) |
| | | | | |
REALIZED AND UNREALIZED LOSS ON INVESTMENTS | | | | |
| Net realized loss on investments | | | (19,751 | ) |
| Net change in unrealized appreciation/depreciation on investments | | | (1,465,676 | ) |
| | | | | |
| Net Realized and Unrealized Loss on Investments | | | (1,485,427 | ) |
| | | | | |
| Net Decrease in Members’ Capital Resulting from Operations | | $ | (2,435,844 | ) |
| | | | | |
| The accompanying notes are an integral part of these financial statements | | | | |
Rochdale Core Alternative Strategies Master Fund LLC
| | | Year Ended
March 31, 2012 | | | Year Ended
March 31, 2011 | |
| FROM OPERATIONS | | | | | | |
| Net investment loss | | $ | (950,417 | ) | | $ | (968,025 | ) |
| Net realized loss on investments | | | (19,751 | ) | | | (1,165,122 | ) |
| Net change in unrealized appreciation/depreciation on investments | | | (1,465,676 | ) | | | 6,330,075 | |
| | | | | | | | | |
| Net Increase (Decrease) in Members’ Capital Resulting From Operations | | | (2,435,844 | ) | | | 4,196,928 | |
| | | | | | | | | |
| INCREASE (DECREASE) FROM TRANSACTIONS IN MEMBERS’ CAPITAL | | | | | |
| Proceeds from sales of members’ interests | | | 5,807,542 | | | | 6,139,018 | |
| Payments for purchases of members’ interests | | | (6,693,038 | ) | | | (8,961,701 | ) |
| Net Payments for Members’ Interests | | | (885,496 | ) | | | (2,822,683 | ) |
| | | | | | | | | |
| Total Increase (Decrease) in Members’ Capital | | | (3,321,340 | ) | | | 1,374,245 | |
| | | | | | | | | |
| MEMBERS’ CAPITAL | | | | | | | | |
| Beginning of year | | | 58,990,085 | | | | 57,615,840 | |
| | | | | | | | | |
| End of year | | $ | 55,668,745 | | | $ | 58,990,085 | |
| | | | | | | | | |
| The accompanying notes are an integral part of these financial statements | | | | | |
Rochdale Core Alternative Strategies Master Fund LLC
Year Ended March 31, 2012
| | | | |
| CASH FLOW FROM OPERATING ACTIVITIES | | | |
| Net decrease in members’ capital resulting from operations | | $ | (2,435,844 | ) |
Adjustments to reconcile net decrease in members’ capital resulting from operations to net cash from operating activities: | | | | |
| Purchases of investments | | | (7,250,000 | ) |
| Sales of investments | | | 9,220,657 | |
| Purchases of money market fund | | | (24,943,864 | ) |
| Sales of money market fund | | | 24,781,290 | |
| Net change in unrealized appreciation/depreciation on investments | | | 1,465,676 | |
| Net realized loss on investments | | | 19,751 | |
| Change in Operating Assets and Liabilities: | | | | |
| Investments made in advance | | | (1,250,000 | ) |
| Receivable for fund investments sold | | | 1,917,685 | |
| Prepaid expenses | | | 96 | |
| Interest receivable | | | 54 | |
| Management fees payable | | | 52,679 | |
| Contributions received in advance | | | (680,000 | ) |
| Professional fees payable | | | (3,623 | ) |
| Accrued expense and other liabilities | | | (9,061 | ) |
| | | | | |
| Net Cash from Operating Activities | | | 885,496 | |
| | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | |
| Proceeds from sales of members’ interests | | | 5,807,542 | |
| Payments for purchases of members’ interests | | | (6,693,038 | ) |
| Net Cash used in Financing Activities | | | (885,496 | ) |
| | | | | |
| Net Change in Cash and Cash Equivalents | | | - | |
| | | | | |
| CASH AND CASH EQUIVALENTS | | | | |
| Beginning of year | | | - | |
| | | | | |
| End of year | | $ | - | |
| | | | | |
| The accompanying notes are an integral part of these financial statements | | | | |
Rochdale Core Alternative Strategies Master Fund LLC
March 31, 2012
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Redemptions | |
Long-Term Investment Funds 1: | | Percentage of Members’ Capital | | | Cost | | | Fair Value | | | Frequency | | | Notice Period # of Days | |
| | | | | | | | | | | | | | | | |
| Equity Long / Short Strategy: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Absolute Partners Fund LLC | | | 3.23 | % | | $ | 1,750,000 | | | $ | 1,799,766 | | | Monthly | | | | 90 | |
| Alphagen Rhocas | | | 3.11 | | | | 1,750,000 | | | | 1,729,825 | | | Monthly | | | | 30 | |
| Blackthorn Partners, LP | | | 3.86 | | | | 1,620,085 | | | | 2,151,883 | | | Monthly | | | | 45 | |
| Clovis Capital Partners Institutional, LP | | | 3.80 | | | | 2,064,783 | | | | 2,118,632 | | | Quarterly | | | | 45 | |
| Criterion Institutional Partners, LP | | | 4.78 | | | | 2,250,000 | | | | 2,661,397 | | | Monthly | | | | 45 | |
| LAE Fund L.P. | | | 2.73 | | | | 1,500,000 | | | | 1,520,518 | | | Monthly | | | | 30 | |
| Newbrook Capital Partners, L.P. | | | 4.95 | | | | 2,500,000 | | | | 2,753,366 | | | Quarterly | | | | 45 | |
| Sandler Associates | | | 5.46 | | | | 2,500,000 | | | | 3,038,151 | | | Quarterly | | | | 30 | |
| Seligman Health Spectrum Plus Fund LLC | | | 4.21 | | | | 1,750,000 | | | | 2,342,654 | | | Monthly | | | | 30 | |
| Standard Global Equity Partners SA, LP | | | 4.86 | | | | 2,500,000 | | | | 2,705,839 | | | Quarterly | | | | 45 | |
| Standard Pacific Pan-Asia Fund, L.P. | | | 2.15 | | | | 1,250,000 | | | | 1,196,035 | | | Quarterly | | | | 45 | |
| | | | 43.14 | | | | 21,434,868 | | | | 24,018,066 | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Event / Multi-Strategy: | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Bennelong Asia Pacific Multi Strategy Equity Fund, LP | | | 0.32 | | | | 165,549 | | | | 179,863 | | | ** | | | | ** | |
| Brencourt Multi Strategy Arbitrage, LP | | | 0.19 | | | | 107,621 | | | | 108,347 | | | ** | | | | ** | |
| Brigade Leveraged Capital Structures Fund LP | | | 3.80 | | | | 1,626,511 | | | | 2,114,521 | | | Quarterly | | | | 60 | |
| Canyon Value Realization Fund, LP | | | 4.22 | | | | 2,000,000 | | | | 2,348,792 | | | Annually | | | | 100 | |
| Castlerigg Partners | | | 0.06 | | | | 55,489 | | | | 34,206 | | | ** | | | | ** | |
| GoldenTree Partners LP | | | 4.56 | | | | 1,860,543 | | | | 2,537,556 | | | Quarterly | | | | 90 | |
GoldenTree Partners LP 2 | | | 0.67 | | | | 289,457 | | | | 370,467 | | | ** | | | | ** | |
| HBK Fund II L.P. | | | 6.37 | | | | 3,000,000 | | | | 3,543,817 | | | Quarterly | | | | 90 | |
| King Street Capital LP | | | 0.07 | | | | 22,542 | | | | 38,877 | | | ** | | | | ** | |
| Luxor Capital Partners, L.P. | | | 3.70 | | | | 2,000,000 | | | | 2,060,531 | | | Quarterly | | | | 90 | |
| OZ Asia Domestic Partners, LP | | | 4.44 | | | | 2,250,000 | | | | 2,468,715 | | | Annually | | | | 45 | |
| Polygon Recovery Fund, LP | | | 0.43 | | | | 534,567 | | | | 241,685 | | | * | | | | * | |
Stark Select Asset Fund LLC 3 | | | 0.25 | | | | 137,091 | | | | 136,982 | | | ** | | | | ** | |
| York Capital Management, LP | | | 5.67 | | | | 3,000,000 | | | | 3,158,435 | | | Quarterly | | | | 45 | |
| | | | 34.75 | | | | 17,049,370 | | | | 19,342,794 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Global Macro Strategy: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Blenheim Commodity Fund, LLC | | | 2.99 | | | | 1,500,000 | | | | 1,662,471 | | | Monthly | | | | 65 | |
| Boronia Diversified Fund (U.S.) LP | | | 1.84 | | | | 1,000,000 | | | | 1,027,392 | | | Monthly | | | | 30 | |
| CamCap Resources, LP | | | 1.94 | | | | 1,250,000 | | | | 1,080,180 | | | Quarterly | | | | 60 | |
| Caxton Global Investments (USA) LLC | | | 0.07 | | | | 30,876 | | | | 37,847 | | | ** | | | | ** | |
| Dynamic | | | 1.66 | | | | 609,607 | | | | 925,711 | | | Monthly | | | | 30 | |
| MKP Opportunity Partners, LP | | | 3.48 | | | | 1,750,000 | | | | 1,935,756 | | | Monthly | | | | 60 | |
| Robeco Transtrend Diversified Fund LLC | | | 2.94 | | | | 1,500,000 | | | | 1,637,872 | | | Monthly | | | | 5 | |
| Sunrise Commodities Fund | | | 2.72 | | | | 1,110,000 | | | | 1,514,809 | | | Monthly | | | | 15 | |
| | | | 17.64 | | | | 8,750,483 | | | | 9,822,038 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Long-Term Investment Funds: | | | 95.53 | % | | $ | 47,234,721 | | | $ | 53,182,898 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Short-Term Investment: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Money Market Fund: | | | | | | | | | | | | | | | | | | | | |
First American Government Obligations Fund, 0.02% 4 | | | 2.42 | % | | $ | 1,345,289 | | | $ | 1,345,289 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Investments | | | 97.95 | % | | $ | 48,580,010 | | | $ | 54,528,187 | | | | | | | | | |
The accompanying notes are an integral part of these financial statements
Rochdale Core Alternative Strategies Master Fund LLC
Schedule of Investments, Continued
March 31, 2012
1. All investments are non-income producing.
2. This Fund is a side pocket of GoldenTree Partners LP.
3. This Fund is a side pocket of Stark Investments Limited Partnership.
4. 7-Day Yield.
* Redemption restrictions exist for Hedge Funds whereby the Hedge Fund Managers may suspend redemption either in their sole discretion or other factors. Such factors include the magnitude of redemptions requested, portfolio valuation issues or market conditions. The Polygon Recovery Fund, LP is a portfolio mainly comprised of the assets of Polygon Global Opportunity Master Fund, of which redemptions are currently suspended as the fund is in the process of being liquidated or restructured.
** Special Investments have been established for Bennelong Asia Pacific Multi Strategy Equity Fund, LP, Brencourt Multi Strategy Arbitrage, LP, Castlerigg Partners, GoldenTree Partners LP, King Street Capital LP, Stark Select Asset Fund LLC and Caxton Global Investments (USA) LLC. These investments are long-term and illiquid.
Equity Long / Short Strategy. Equity investing involves the purchase and / or sale of listed or unlisted equity and equity-related financial instruments usually based on fundamental research and analysis. Hedge Fund Managers may invest opportunistically in several sectors or they may be sector specialists. These Hedge Fund Managers may be globally or regionally focused. Hedge Fund Managers may also have a style bias, such as growth or value. The average holding period of Hedge Fund Managers may vary as well between long-term or short-term trading. Some Hedge Fund Managers may also take a top-down thematic approach while others utilize a bottoms-up approach pursuant to which individual securities are selected.
Event / Multi-Strategy. Multi-strategy investing is an investment strategy that focuses on the securities of companies undergoing some material structural changes. These changes can come in the form of mergers, acquisitions, spin offs, Dutch tender offers, share buybacks and other reorganizations. This strategy also seeks to exploit relative value inefficiencies across the capital structure or among closely related markets, generally without assuming an unhedged exposure to any particular market or financial instrument.
Global Macro Strategy. Macro strategies take long, short and relative value positions in financial instruments based on a top-down fundamental and technical analysis of capital market conditions. Hedge Fund Managers begin evaluating opportunities based on economic and/or technical factors, working their way down to regional, country and industry specific analysis. The Hedge Fund Managers make judgements about the expected future price direction of asset classes and express that opinion by taking long or short positions in a variety of instruments. Investments are usually made in a wide variety of global futures, cash instruments and other financial instruments, including stocks, bonds, currencies, derivatives and commodities.
The accompanying notes are an integral part of these financial statements
Rochdale Core Alternative Strategies Master Fund LLC
Schedule of Investments, Continued
March 31, 2012
Strategy Allocation Breakdown
(as a % of total investments)
The accompanying notes are an integral part of these financial statements
Rochdale Core Alternative Strategies Master Fund LLC
| | |
| 1. | Organization |
| | |
| | Rochdale Core Alternative Strategies Master Fund LLC (the “Master Fund”) is a closed-end, non-diversified management Investment Company that was organized as a limited liability company under the laws of the State of Delaware on September 11, 2006 and serves as a master fund in a master feeder structure. Interests in the Master Fund are issued solely in private placement transactions that do not involve any “public offering” within the meaning of Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”). Investments in the Master Fund may be made only by U.S. and foreign investment companies, common or commingled trust funds, organizations or trusts described in Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended, or similar organizations or entities that are “accredited investors” within the meaning of Regulation D under the 1933 Act. The Master Fund is a registered investment company under the Investment Company Act of 1940. |
| | |
| | Rochdale Investment Management, LLC (the “Manager”, “Adviser” or “Rochdale”) is the investment adviser to the Master Fund. The Manager delegates sub-investment advisory responsibilities to PineBridge Investments (the “Sub-Adviser”) with respect to the Master Fund. |
| | |
| | The Master Fund seeks to achieve its objective by investing substantially all of its assets in the securities of privately placed investment vehicles, typically referred to as hedge funds (“Hedge Funds” or “Investment Funds”), that pursue a variety of “absolute return” investment strategies. “Absolute return” refers to a broad class of investment strategies that attempt to consistently generate positive returns regardless of market conditions. |
| | |
| | The Master Fund’s investment objective is to seek long-term growth of principal across varying market conditions with low volatility. “Low volatility” in this objective means the past monthly net asset value fluctuations of the Master Fund’s net asset value that is no greater than the rolling 10-year annualized standard deviation of the monthly ups and downs of the higher of: (1) the return of the Barclays Capital Aggregate Bond Index plus 3% or (2) half of the return of the Standard & Poor’s 500-stock Index. Master Fund investments generally fall within the following broadly defined investment fund strategies: equity long/short, event/multi-strategy driven and global macro. |
| | |
| 2. | Significant Accounting Policies |
| | |
| | The following is a summary of significant accounting policies followed by the Master Fund. |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| | |
| 2. | Significant Accounting Policies (continued) |
| | |
| | Basis of Presentation and Use of Estimates |
| | |
| | The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. |
| | |
| | Investments Valuation |
| | |
| | Investments are carried at fair value. The fair value of alternative investments has been estimated using the Net Asset Value (“NAV”) as reported by the management of the respective alternative investment fund. Financial Accounting Standards Board (FASB) guidance provides for the use of NAV as a “Practical Expedient” for estimating fair value of alternative investments. NAV reported by each alternative investment fund is used as a practical expedient to estimate the fair value of the Master Fund’s interest therein and their classification within Level 2 or 3 is based on the Master Fund’s ability to redeem its interest in the near term and liquidate the underlying portfolios. |
| | |
| | The Master Fund has not maintained any positions in derivative instruments or directly engaged in hedging activities. |
| | |
| | Fair Value Measurements |
| | |
| | The Master Fund follows fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized in the three broad levels listed below: |
| | |
| | Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Master Fund has the ability to access. |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| | |
| 2. | Significant Accounting Policies (continued) |
| | |
| | Fair Value Measurements (continued) |
| | |
| | Level 2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| | |
| | Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Master Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
| | |
| | The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. See Note 3. |
| | |
| | Investment Income Recognition |
| | |
| | Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date. Realized and unrealized gains and losses are included in the determination of income. |
| | |
| | Fund Expenses |
| | |
| | The expenses of the Master Fund include, but are not limited to, the following: legal fees; accounting and auditing fees; custodial fees; management fees; an incentive fee; costs of computing the Master Fund’s net asset value; costs of insurance; registration expenses; due diligence, including travel and related expenses; expenses of meetings of the Board and members; all costs with respect to communications to members; and other types of expenses as may be approved from time to time by the Board. |
| | |
| | Income Taxes |
| | |
| | The Master Fund’s tax year end is December 31. The Master Fund is treated as a partnership for Federal income tax purposes. Each Member is responsible for the tax liability or benefit relating to such Member’s distributive share of taxable income or loss. Accordingly, no provision for Federal income taxes is reflected in the accompanying financial statements. |
| | |
| | The Master Fund has adopted authoritative guidance on uncertain tax positions. The Master Fund recognizes the effect of tax positions when they are more likely than not of being sustained. Management is not aware of any exposure to uncertain tax positions that could require accrual or which could affect its liquidity or future cash flows. As of |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| | |
| 2. | Significant Accounting Policies (continued) |
| | |
| | Income Taxes (continued) |
| | |
| | March 31, 2012, the Master Fund’s tax years 2008 through 2011 remain open and subject to examination by relevant taxing authorities. |
| | |
| | Subsequent Events |
| | |
| | The Master Fund has adopted financial reporting rules regarding subsequent events, which requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the Master Fund’s related events and transactions that occurred subsequent to March 31, 2012 through the date the financial statements have been issued (see Note 9). |
| | |
| | Capital Accounts |
| | |
| | Net profits or net losses of the Master Fund for each month are allocated to the capital accounts of Members as of the last day of each month in accordance with Members’ respective investment percentages of the Master Fund. Net profits or net losses are measured as the net change in the value of the net assets of the Master Fund during a fiscal period, before giving effect to any repurchases of interest in the Master Fund, and excluding the amount of any items to be allocated to the capital accounts of the Members of the Master Fund, other than in accordance with the Members’ respective investment percentages. |
| | |
| | Prior to the end of each quarter and year end, the Master Fund receives Member contributions with an effective subscription date of the first day of the following month. |
| | |
| | The Master Fund, in turn, makes contributions to certain Hedge Funds, which have effective subscription dates of the first day of the following month. These amounts are reported as “Contributions received in advance” and “Investments made in advance”, respectively. |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| | |
| 3. | Investments |
| | |
| | The following alternative and temporary investments were measured at fair value as of March 31, 2012 using the practical expedient: |
| | Description | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Total | |
| | | | | | | | | | | | | | | | | | |
| | Alternative Investments | | $ | - | | | $ | 30,482,519 | | | $ | 22,700,379 | | | $ | 53,182,898 | |
| | Short-Term Investment | | | 1,345,289 | | | | - | | | | - | | | | 1,345,289 | |
| | | | | | | | | | | | | | | | | | |
| | Total Investments | | $ | 1,345,289 | | | $ | 30,482,519 | | | $ | 22,700,379 | | | $ | 54,528,187 | |
| | The following is a reconciliation of the beginning and ending balances for Level 3 investments during the fiscal year ended March 31, 2012: |
| | | Alternative Investments | |
| | | | | |
| Balance, March 31, 2011 | | $ | 22,394,146 | |
| | | | | |
| Total Realized Gains/(Losses) | | | 90,853 | |
| Change in Unrealized Gains/Losses | | | (490,926 | ) |
| | | | | |
| Purchases | | | 2,750,000 | |
| Sales | | | (2,043,694 | ) |
| | | | | |
| Transfers in and/or out of Level 3 | | | - | |
| | | | | |
| Balance, March 31, 2012 | | $ | 22,700,379 | |
| | Net unrealized gains relating to Level 3 alternative investments still held at March 31, 2012 are $2,370,133. |
| | |
| | There were no significant transfers into or out of Level 1, 2 or 3 fair value measurements during the reporting period, as compared to their classification from the most recent annual report. |
| | |
| | In May 2011, the Financial Accounting Standards Board (“FASB”) issued “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements” in GAAP and the International Financial Reporting Standards (“IFRS”). This requirement amends FASB Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. This requirement is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. |
| | |
| | Management is currently evaluating the impact of these amendments and does not believe they will have a material impact on the Master Fund’s financial statements. |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| | |
| 4. | Commitments and Other Related Party Transactions |
| | |
| | Management and Incentive Fees |
| | |
| | Under the supervision of the Master Fund’s Board and pursuant to an investment management agreement (“Investment Management Agreement”), Rochdale Investment Management LLC, an investment adviser registered under the Investment Advisers Act of 1940, as amended, serves as the Manager for the Master Fund. The Manager is authorized, subject to the approval of the Master Fund’s Board, to retain one or more other organizations, including its affiliates, to provide any or all of the services required to be provided by the Manager to the Master Fund or to assist in providing these services. |
| | |
| | The Manager has engaged the Sub-Adviser to provide sub-investment advisory services. The Sub-Adviser has investment discretion to manage the assets of the Master Fund and is responsible for identifying prospective Hedge Funds, performing due diligence and review of those Hedge Funds and their Hedge Fund Managers, selecting Hedge Funds, allocating and reallocating the Master Fund’s assets among Hedge Funds, and providing risk management services, subject to the general supervision of the Manager. |
| | |
| | The investment management fee is shared by the Manager and the Sub-Adviser. The Master Fund will pay the Manager an investment management fee at an annual rate equal to 1.25% of the Master Fund’s month-end net assets, including assets attributable to the Manager (or its affiliates) and before giving effect to any repurchases by the Master Fund of Member interests. The investment management fee is accrued monthly. The investment management fee will be paid to the Manager out of the Master Fund’s assets. |
| | |
| | The Manager will pay a fee to the Sub-Adviser at a rate equal to 60% of the amount of the fee earned by the Manager pursuant to the Investment Management Agreement. |
| | |
| | The Sub-Adviser through the feeder funds is entitled to receive a performance-based incentive fee equal to 10% of the net profits (taking into account net realized and unrealized gains or losses and net investment income or loss), if any, in excess of the non-cumulative “Preferred Return,” subject to reduction of that excess for prior losses that have not been previously offset against net profits (the “Incentive Fee”). The Incentive Fee will be accrued monthly and is generally payable annually on a calendar year basis. The Preferred Return is an annual return equal to the 3-year Treasury constant maturity rate as reported by the Board of Governors of the Federal Reserve System as of the last business day of the prior calendar year plus 2%. |
| | |
| | Expense Reimbursement |
| | |
| | The Manager has contractually agreed to waive and/or reimburse the Master Fund’s expenses to the extent needed to limit the Master Fund’s annual operating expenses combined with the annual operating expenses of Rochdale Core Alternative Strategies Fund LLC or Rochdale Core Alternative Strategies Fund TEI LLC (the “Feeder Funds”) |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| | |
| 4. | Commitments and Other Related Party Transactions (continued) |
| | |
| | Expense Reimbursement (continued) |
| | |
| | to 2.25% of net assets for each Feeder Fund. To the extent that the Manager reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which the expenses were reimbursed or absorbed. A Feeder Fund will make no such payment, however, if its total annual operating expenses exceed the expense limits in effect at the time the expenses are to be reimbursed or at the time these payments are proposed. |
| | |
| | The following is a schedule of when fees may be recouped by the Manager with respect to the Rochdale Core Alternative Strategies Fund LLC: |
| Amount | | | Expiration | |
| | | | | | | |
| $ | 9,020 | | | | March 31, 2013 | |
| | 27,673 | | | | March 31, 2014 | |
| | 21,100 | | | | March 31, 2015 | |
| $ | 57,793 | | | | | |
| | There were no amounts receivable or payable as a result of these reimbursements in the Rochdale Core Alternative Strategies Fund TEI LLC and Subsidiary at March 31, 2012. |
| | |
| | No accrual has been made for such contingent liability because of the uncertainty of the reimbursement from the Fund. |
| | |
| 5. | Investment Risks and Uncertainties |
| | |
| | Alternative Investments consist of non-traditional, not readily marketable investments, some of which may be structured as offshore limited partnerships, venture capital funds, hedge funds, private equity funds and common trust funds. The underlying investments of such funds, whether invested in stock or other securities, are generally not currently traded in a public market and typically are subject to restrictions on resale. Values determined by investment managers and general partners of underlying securities that are thinly traded or not traded in an active market may be based on historical cost, appraisals, a review of the investees’ financial results, financial condition and prospects, together with comparisons to similar companies for which quoted market prices are available or other estimates that require varying degrees of judgment. |
| | |
| | Investments are carried at fair value provided by the respective alternative investment’s management. Because of the inherent uncertainty of valuations, the estimated fair values may differ significantly from the values that would have been used had a ready market for such investments existed or had such investments been liquidated, and those differences could be material. |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| | |
| 6. | Concentration, Liquidity and Off-Balance Sheet Risk |
| | |
| | The Master Fund invests primarily in Hedge Funds that are not registered under the 1940 Act and invest in and actively trade securities and other financial instruments using different strategies and investment techniques, including leverage, which may involve significant risks. These Hedge Funds may invest a high percentage of their assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, the Hedge Funds may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility of the Hedge Funds’ net asset value. |
| | |
| | Various risks are also associated with an investment in the Master Fund, including risks relating to the multi-manager structure of the Master Fund, risks relating to compensation arrangements and risks relating to limited liquidity, as described below. |
| | |
| | Redemption restrictions exist for Hedge Funds whereby the Hedge Fund Managers may suspend redemption either in their sole discretion or other factors. Such factors include the magnitude of redemptions requested, portfolio valuation issues or market conditions. |
| | |
| | Redemptions are currently restricted for certain Hedge Funds with a fair value at March 31, 2012 aggregating $1,148,274 as noted in the Schedule of Investments. |
| | |
| | In the normal course of business, the Hedge Funds in which the Master Fund invests trade various financial instruments and enter into various investment activities with off-balance sheet risk. These include, but are not limited to, short selling activities, writing option contracts, contracts for differences, and interest rate, credit default and total return equity swap contracts. The Master Fund’s risk of loss in these Hedge Funds is limited to the value of its own investments reported in these financial statements by the Master Fund. The Master Fund itself does not invest directly in securities with off-balance sheet risk. |
| | |
| 7. | Investment Transactions |
| | |
| | For the fiscal year ended March 31, 2012, the aggregate purchases (excluding short-term securities) were $7,250,000 and sales of investments were $9,220,657. |
| | |
| 8. | Issuer Tender Offer |
| | |
| | The Master Fund offered to purchase up to $8,000,000 of Interests in the Master Fund properly tendered at a price equal to the net asset value of Interests as of December 30, 2011. For Interests tendered, the security holder received a promissory note entitling the security holder to a cash amount equal to at least 90% of the net asset value calculated on December 30, 2011, of the Interests tendered and accepted for purchase by the Master Fund, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 15, 2011. The offer terminated at 5:00 p.m., Eastern Time, on September 12, |
Rochdale Core Alternative Strategies Master Fund LLC
Notes to Financial Statements
| 8. | Issuer Tender Offer (continued) |
| | |
| | 2011. Pursuant to the Offer, Interests with a net asset value of $1,558,192, as determined as of the valuation date, were tendered and accepted by the Master Fund. |
| | |
| 9. | Subsequent Event |
| | |
| | On April 25, 2012, the Adviser and City National Bank (“City National”) announced that they had reached an agreement pursuant to which City National will acquire 100% of the issued and outstanding stock of the Adviser’s Parent Company. This transaction (the “Transaction”) is expected to be completed on or about June 30, 2012 (“Closing Date”). Following the Closing Date, the Adviser, together with certain other companies that, currently, are also wholly-owned by the Adviser’s parent company, will continue to conduct their businesses as wholly-owned subsidiaries of City National. While the Transaction is expected to close on the Closing Date, consummation of the Transaction is contingent on the satisfaction of several conditions. |
| | |
| | Management has evaluated the impact of this subsequent event and determined it will not have a material impact on the Master Fund’s financial statements. |
Rochdale Core Alternative Strategies Master Fund LLC
| | | | | | | | | | | | | | | | | | | Period from | |
| | | | | | | | | | | | | | | | | | | July 1, 2007 | |
| | | | | | | | | | | | | | | | | | | (Commencement of | |
| | | | | | | | | | | | | | | | | | | Operations) | |
| | | Year Ended | | | Year Ended | | | Year Ended | | | Year Ended | | | through | |
| | | March 31, 2012 | | | March 31, 2011 | | | March 31, 2010 | | | March 31, 2009 | | | March 31, 2008 | |
| TOTAL RETURN - NET | | (4.08 | %) | | | 7.32 | % | | | 9.16 | % | | | (11.14 | %) | | | (5.01 | %) | |
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| RATIOS/SUPPLEMENTAL DATA | | | | | | | | | | | | | | | | | | | | |
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Net Assets, end of period ($000’s) | | $55,669 | | | | $58,990 | | | | $ 57,616 | | | | $ 50,359 | | | | $ 48,948 | | |
| Portfolio Turnover | | 13.27 | % | | | 20.32 | % | | | 20.91 | % | | | 19.34 | % | | | 1.39 | % | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratio of Net Investment Loss to Average Net Assets | | (1.66 | %) | | | (1.67 | %) | | | (1.83 | %) | | | (1.55 | %) | | | (1.57 | %) | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratio of Expenses to Average Net Assets | | 1.67 | % | | | 1.68 | % | | | 1.69 | % | | | 1.67 | % | | | 1.86 | % | |
Total return is calculated for all Members taken as a whole and an individual Member’s return may vary from these Master Fund returns based on the timing of capital transactions. The total return for periods less than one year are not annualized.
The ratios of net investment loss to average net assets and ratios of expenses to average net assets are annualized for periods of less than one year. The ratios of expenses to average net assets do not include expenses of the Hedge Funds in which the Master Fund invests.
The expense ratios are calculated for all Members taken as a whole. The computation of such ratios based on the amount of expenses assessed to an individual Member’s capital may vary from these ratios based on the timing of capital transactions.
The ratios above do not include the proportionate share of income or loss from their investments in other funds.
The accompanying notes are an integral part of these financial statements
See Report of Independent Registered Public Accounting Firm
ROCHDALE CORE ALTERNATIVE STRATEGIES MASTER FUND LLC
The Directors of the Fund, who were elected for an indefinite term by the shareholders of the Fund, are responsible for the overall management of the Fund, including, general supervision and review of the investment activities of the Fund. The Directors, in turn, elect the officers of the Fund, who are responsible for administering the day to day operations of the Fund. The current Directors and Officers, their affiliations and principal occupations for the past five years are set forth below. The Statement of Additional Information includes additional information about the Directors and is available, without charge, by calling 1-866-209-1967.
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| Interested Directors and Officers |
| | | | | Term of | | | | Number of | | Other | |
| | | Position(s) | | Office and | | | | Funds in Fund | | Directorships | |
| | | Held with | | Length of | | Principal Occupation(s) | | Complex Overseen | | Held by | |
| Name, Address and Age | | Fund | | Time Served | | During the Past Five Years | | by Director | | Director | |
| Carl Acebes | | Chairman and | | Since Inception | | Chairman and Co-Chief Investment Officer of Rochdale Investment Management LLC | | 1 | | * | |
| 570 Lexington Avenue | | Director | | | | | | | | |
| New York, NY 10022 | | | | | | | | | | |
| Age: 65 | | | | | | | | | | |
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| Garrett R. D’Alessandro | | President | | Since Inception | | President, Chief Executive Officer and Co-Chief Investment Officer of Rochdale Investment Management LLC | | 1 | | * | |
| 570 Lexington Avenue | | Vice-Chairman | | Since 2011 | | | | | | |
| New York, NY 10022 | | and Director | | Since 2011 | | | | | | |
| Age: 54 | | | | | | | | | | |
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| William O’Donnell | | Treasurer | | Since 2011 | | Chief Financial Officer of Rochdale Investment Management LLC since July 2011; Financial Consultant, October 2009 to June 2011; Financial Officer, Compliance Officer & Corporate Secretary Trustee - Clay Finlay Pension Plan of Clay Finlay LLC, October 1990 to to September 2009 | | N/A | | N/A | |
| 570 Lexington Avenue | | | | | | | | | | |
| New York, NY 10022 | | | | | | | | | | |
| Age: 48 | | | | | | | | | | |
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| Barbara Hawkesworth | | Chief | | Since 2011 | | Executive Vice President, Chief Compliance Officer and Deputy General Counsel for Rochdale Investment Management LLC and Symphonic Financial Advisors LLC | | N/A | | N/A | |
| 570 Lexington Avenue | | Compliance | | | | | | | | |
| New York, NY 10022 | | Officer | | | | | | | | |
| Age: 39 | | | | | | | | | | |
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| Kurt Hawkesworth | | Secretary | | Since 2010 | | Senior Executive Vice President, Chief Operating Officer and General Counsel of Rochdale Investment Management LLC | | N/A | | N/A | |
| 570 Lexington Avenue | | | | | | | | | | |
| New York, NY 10022 | | | | | | | | | | |
| Age: 40 | | | | | | | | | | |
| Independent Directors |
| | | | | Term of | | | | Number of | | Other | |
| | | Position(s) | | Office and | | | | Funds in Fund | | Directorships | |
| | | Held with | | Length of | | Principal Occupation(s) | | Complex Overseen | | Held by | |
| Name, Address and Age | | Fund | | Time Served | | During the Past Five Years | | by Director | | Director | |
| Daniel A. Hanwacker, Sr. | | Director | | Since 2011 | | CEO and President, Hanwacker Associates, Inc. (asset management consulting and executive search services) | | 1 | | * | |
| 570 Lexington Avenue | | | | | | | | | | |
| New York, NY 10022 | | | | | | | | | | |
| Age: 60 | | | | | | | | | | |
| | | | | | | | | | | | |
| Susan Henshaw Jones | | Director | | Since 2011 | | President and Director, Museum of the City of New York | | 1 | | * | |
| 570 Lexington Avenue | | | | | | | | | | |
| New York, NY 10022 | | | | | | | | | | |
| Age: 64 | | | | | | | | | | |
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| Jay C. Nadel | | Director | | Since 2011 | | Financial Services Consultant | | 1 | | * | |
| 570 Lexington Avenue | | | | | | | | | Lapolla Industries, | |
| New York, NY 10022 | | | | | | | | | Inc. (2007 - present) | |
| Age: 53 | | | | | | | | | | |
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| * | Rochdale Investment Trust, Rochdale Core Alternative Strategies Fund TEI LLC, Rochdale Core Alternative Strategies Fund LLC, Rochdale Structured Claims Fixed Income Fund LLC, Rochdale Alternative Total Return Fund LLC, Rochdale International Trade Fixed Income Fund and Rochdale Royalty Rights Fund. |
At a quarterly meeting held on December 14, 2011, the Directors of the Rochdale Core Alternative Strategies Master Fund LLC (the “Master Fund”) and Rochdale Core Alternative Strategies Fund LLC and Rochdale Core Alternative Strategies Fund TEI LLC (the “Feeder Funds”), (collectively, the “Funds”), including all of the Directors who are not “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act), met in person and voted to approve the investment advisory agreement (the “Advisory Agreement”) between the Master Fund and Rochdale Investment Management, LLC (the “Adviser”).
In the course of their review, the Directors with the assistance of independent counsel, considered their legal responsibilities that attach to that process under the Investment Company Act and state law. The Independent Directors considered the terms of the Advisory Agreement, as well as the related terms of the sub-advisory agreement with PineBridge Investments LLC (the “Sub-Adviser”), including the structure of the compensation arrangements, the resources and experience of the Adviser and Sub-Adviser and the individuals at those organizations dedicated to the business of the Funds. The Independent Directors then reviewed fee information for a variety of investment funds similar in structure to the Master Fund and determined that the advisory fees as well as the Feeder Funds’ expense ratios were competitive to the peer group funds. In reviewing the nature, extent and quality of advisory services provided by the Adviser, the Board considered the performance of the Master Fund and the Feeder Funds relative to their respective benchmarks and the Adviser’s oversight of the Sub-Adviser’s management of the Master Fund’s portfolio. The Board concluded that the overall quality of the services provided by the Adviser to the Funds was satisfactory and continues to support the Board’s original selection of the Adviser. The Board also considered the experience and capabilities of the Adviser’s management and investment professionals as well as the fact that the Funds serve as vehicles for implementing asset allocation strategies for the substantial portion of the Funds’ shareholders who are also advisory clients of Rochdale.
In reviewing the structure of the advisory fee and corollary factors such as the cost of services provided and profits realized by the Adviser, the Board considered information relating to advisory fee revenues and those expenses borne by the Adviser, including benefits that may be realized by the Adviser as a result of its relationship with the Funds. The Board concluded that, in light of the increased expenses associated with the management of the Funds and the financial commitment made by the Adviser to its investment advisory business, the rate at which the Adviser is compensated for its services is reasonable.
The Board also considered information about economies of scale, the Adviser’s financial interest in the renewal of the Advisory Agreement and any fallout benefits that might be derived from the Adviser’s contractual arrangements with the Funds. No single factor reviewed by the Board was identified as being a determining factor in their collective decision to renew the Advisory Agreement and the Board did not necessarily place the same level of importance on the various factors taken into consideration during the Directors’ deliberations. Overall, the Board concluded that continuation of the Advisory Agreement would be in the best interest of the Funds and consistent with the expectations of their shareholders.
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Master Fund uses to determine how to vote proxies relating to portfolio securities, as well as information relating to how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, will be available (i) without charge, upon request, by calling 1-800-245-9888; and (ii) on the SEC’s website at www.sec.gov.
Portfolio Holdings Disclosure
The Master Fund will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q will be available on the SEC’s website at www.sec.gov, and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-732-0330.
